Transcription
Ladies and gentlemen, good day, and welcome to Mac Force Limited H2 and FY25 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your Touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Miss Bumika Maheshwari from H Securities. Thank you, and over to you, ma'am.
Thank you, Steve. A very good evening, ladies and gentlemen. Thank you for joining me for Mac Force Limited's quarters and half-year ended 31st March 2025 earnings call. Joining us on the call today from the management team are Mr. Atul Dumra, chairman and managing director; Mr. Bin Prasad, full-time director and CFO; and Mr. Nillesh Kumar, full-time director of Mac Force Limited. We will now commence the call with the opening thought from the management, post which we will open this forum for the Q&A session where management will be glad to respond to any queries that you may have.
Before we go on to the main call, I would like to read the standard disclaimer. There may be forward-looking statements about the company and its subsidiaries which are based on the belief, opinion, and expectations of the company's management as on the date of this call. The company does not assume any obligation to update its forward-looking statements if those beliefs, opinions, expectations, or other circumstances should change. These statements are not guarantees of future performance and involve risks and uncertainties that are difficult to predict. Consequently, listeners should not place any undue reliance on such forward-looking statements. With this, I hand over the call to Mr. Atul Dumra, chairman and managing director, Mac Force Limited, to take it forward. Over to you, sir.
Thank you, Bumika. So first of all, I would like to welcome all our dear share owners and thanks a lot for sparing this time for this call from your busy schedules. So we are very pleased to share our financial results for financial year 2024-2025, which highlighted the significant progress that we have made in key areas of our business. During this year, we have achieved a revenue of almost 258 cr, with a profit before tax of almost 27 cr, and PAT margins of uh around 18 cr. So these results to us represent the robust growth that Robu.in, as a whole, has shown. And if you convert these numbers to growth in revenue, it's 104% growth in revenue, 61% growth in our EBITDA, and 65% growth in our PAT. This underscores the strength of our business model and our efficiency in operational execution. The overall year was marked by healthy demands for our product offerings, and we are optimistic that this demand will continue. As we always say, electronics is becoming a big part of life day by day, as well as the alignment of government policies for manufacturing in India, especially in the segment of electronics. These are and will remain key drivers for growth to our segment.
A notable progress this year has been the expansion of our product catalog. So we have added over 50,000 new SKUs, or new products. So I just want to highlight one thing here. Though this 50,000, as a number, looks very big, but we all have to understand that these are primarily small and low-cost items that we have added. Nevertheless, it's an addition to our product portfolio, a strategic one, and this has significantly enhanced the breadth of our product offerings. We have also enhanced our marketing efforts, both in digital marketing as well as in physical marketing. So this year we have actively participated, for the first time, in a lot of domestic exhibitions. So the exhibitions in Pune, Delhi, Bangalore, Hyderabad. So we have attended a few this year. So these enhanced marketing initiatives, we believe, will broaden our brand visibility and market presence. Along with that, our key business indicators like website traffic, total number of orders served, average order value, and customer retention continue to grow and show strong and positive trends.
As we look to the future, we remain guided by our strategic frameworks, which are Robu 1.0 and Robu 2.0. We believe this will continue to shape our roadmap for 2025 and beyond. Robu 1.0—for I mean, most of our regular investors know this, but for people who are new here—Robu 1.0 represents our electronic distribution business, which is a core business that we have. So basically, here we onboard a principal supplier, have a distribution agreement with them, get their products on board at a competitive price, and these products are distributed in India. That is Robu 1.0. The focus here is delivering electronics tech products at competitive prices, backed by our robust customer support with minimum lead times. And in Robu 1.0, we are investing in our IT infrastructure enhancement, as well as we are strengthening our supplier partnerships to optimize procurement as well as reducing lead times. The expansion of our SKUs reflects our ongoing efforts to build a comprehensive and reliable store in the electronics domain in India.
Now let's talk about Robu 2.0. Robu 2.0 is basically a strategic shift, or a long-term strategic shift, for developing and scaling our own proprietary brands and our own proprietary products. So almost over the past two years, we have been putting in increasing focus for Robu 2.0, and we have doubled down our efforts for research and development in 2024-2025. Robu 2.0 is an initiative which is central to our long-term vision and positions Mac Force for sustainable growth for over—for over the next 5 to 10 years. In the past year alone, we have successfully launched around 186 new products under our in-house development program for Robu 2.0. So these products are basically from two main categories: one is development boards and modules, and the other is parts. So key additions in this new SKUs are agricultural drone frame, ready-to-fly drone kits, some telemetry modules, some TFT and HMI displays, so on so forth. Also, we have our own brand, which is Pro Range, under which we have launched 650-odd products this year, and all these products have been well received by our customers, which reaffirm our quality and innovation as well as our belief that Robu 2.0 is going to be a strong pillar for us over the next 5 to 10 years.
Again, I would like to thank you guys for your trust and support. As I always say, we always consider our investors or share owners as one of our partners, and we believe that you guys are also a key pillar for us, and I assure you that we will always be working for a bright and innovative future for Robu.in. That's it from the management side, guys. Uh, I'll be taking any questions or doubts you have and trying to answer them to the best of my abilities. Thanks again.
Thank you, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use a handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
The first question is from the line of Parikhit Kabra from PKD Advisers. Please go ahead.
Hi, thank you for the opportunity and congratulations on a good set of numbers. Um, my question actually is quite a fundamental and basic question. Uh, because I've been struggling to, you know, intuitively understand why a large-scale enterprise customer who may be purchasing these products in bulk would—would—would, you know, come to Robu and come to Mac Force for its procurement requirements rather than doing it directly. Would it be fair in my understanding that the tail-end equipments that they might have—the arbitrary equipment that they might need—components that they might need is when they come to Mac Force, and besides that they do direct procurement?
Uh, first of all, G, thanks a lot for your question, and it's actually a very good question that you—as you already said. So if you look at Robu's journey, I would say in 2014 we started as totally—as a totally online store; we didn't have any corporate customer per se; we were totally focusing on online sales, or the retail sales, B2C sales, whatever you would like to call it, almost for the first four or five years of our journey. And through the journey, we realized that there is a lot of industry customers who need support as well as our products, and then we formed a corporate sales team around 2019 and started to sell to the corporate customers. So just to give you a perspective, our corporate sales around 2019-20 were only 5% of our total sales; five years from that movement today, our corporate sales are almost 50%—half of our business. We have a strong corporate support, or corporate sales team, key account managers to support corporate customers, and I believe we have learned how to sell our products to, let's say, small and medium-scale corporate customers as part of that journey. I—I—I believe that would be to gain these corporate customers coming—as—as you said—large-scale corporate customers in coming times. For us, as on today, we are not doing a lot of large-case customers. Again, part of your question was that why would a large-scale customer buy from us? So basically, when you go into an electronic distribution model, generally a large-scale customer—even the small or large-scale customer—has to buy from the authorized channel partners because the principal, or the company who has—who—who owns the product, they really don't want to get into local distribution country-wise. Their key strength is designing and developing these new products and bringing them to market to solve customer issues. Yes, whenever there are higher volumes, there are generally tripartite meetings: the one with the principal who is—who owns the product, the distributor who is Mac Force, and then the customer; and of course there are ABCDs. But generally, in electronic distribution, even a large-scale customer would want to go with the local distributor because it is mandated by the principal most of the times. And secondly, they need a number of support. If the product is not working, they need some support locally; who would support them? If they require a small quantity because their production has increased a little bit more at the last moment, or their product is not proving to the exact specifications where they want it to be. So all those kinds of small things are taken care of by local distribution, or the credit terms. How would a manufacturer or a supplier, let's say sitting in Europe, will give credit terms, and if those credit terms are not—if the payment is not served by that customer, how would they go about it? So for all these practical reasons, generally the thumb rule is they go with a distribution partner.
Got it. So would it then be fair to think of Mac Force as the master distributor for many of these components in India? Do we have exclusive distribution for many of these things?
We have distribution for many of these things. We—we are authorized distributors for over 250 brands. However, we are not exclusive distributors for most of them. We are exclusive for a few brands. However, we are not exclusive for most of the brands that we have.
Okay. So then there must be other authorized channel partners in India just like us. Is our right to win the—the—the sheer size and breadth versus our competition?
So for any business—this is true for any business—it always wants to win a lot of market share. However, once you are doing a significant business for any brand, you get certain advantages once you have a good product portfolio. So customers prefer to get a lot of products from one distributor. Secondly, once you are doing—the pricing that you get and the support that you get from the brand also depends on how much volume or how much of the total revenue you are moving. So once you are of a certain size or moving a certain business for the partner, then you almost have that edge over even with a few distributors in the country.
Perfect. Let me just ask you one last question before I get back in the queue. How would you describe our market share in this—in this industry, and who are the key competitors in India?
So as we always say, in India we don't see—we don't have—see a single competitor because we are doing multiple segments around 70,000 SKUs as on today. So we have the most comprehensive portfolio internationally. We always say that there are these three or four big players who are Arrow, Digi-Key, Cornell, Mouser. So internationally, we believe that these are more of similar business models. Of course, we have stocking in India, so we have leverage in that, but yes, locally we don't see—there are people who are doing—having a few thousand SKUs in one segment, few in different segments, but nobody has a comprehensive store or component in support—portfolio like Robu. Sure, then nobody's of the same size, but if you look at the entirety of the industry of all the equipments that you're providing, what would be the market share in India for you? Do you have a sense—uh, this question like market share, we have also tried to calculate a lot of times, however, because the market is—you can say—fragmented, or there are a lot of—things—that there are a lot of components in the market. So we are not—we really don't have a number to put on here that how much is the market size, how much of that is we are doing as a business.
Got it. Thank you so much for your time. I'll get back in the queue.
Yeah. Thank you, G. The next question is from the line of Balaji Vya from Nava AMC. Please go ahead.
Atul and Nilesh, many congrats and great set of numbers. Uh, just a couple of questions. One, you know, we have seen broadbasing of your SKUs to almost 70,000 now. Uh, what I'm trying to understand is considering that you have given more business to your vendors, uh, I was expecting that the days payable number to actually be higher than last year, meaning that you would have kind of bargained for better payable days, but I've seen that in FY25 your payable days has actually come down, so any thoughts on that? Was point number one. Point number two, this SKU addition—I mean, of course, this was always a planned strategy, but does the 90-day trade barrier also have some kind of a—you know, some—some kind of an impact on this particular decision of yours to broadbase the number of SKUs? Thank you.
Uh, Balaji, G, I didn't get your second part of this question about SKUs. Uh, could you please repeat that?
So if you look at the, you know, the days payable—the amount of time that you would take to pay to your vendors—that has actually dropped compared to last year. Uh, so I was actually expecting that the days payable number would actually go higher considering that you have even more business and you're broadbasing your SKUs. Uh, yes, and the second question was—
The second question was how much of the, you know, the current geopolitical situation—the trade barriers—that has played a part in trying to broadbase your SKUs in the last quarter of this financial year.
Okay. So I'll answer the second part first. Uh, that how much of a geopolitical situation has played a role in broadening our number of SKUs. So uh, I don't think it has played any part—I mean, active part. Yes, of course, there is a geopolitical situation. I mean, uh, something—sometime—every time something is going on around which is going to impact a lot of businesses in India. Robu is no exception. However, this broadening of SKUs, we really haven't thought much that way. Our thinking process is simple. We look at a certain target for revenue, short-term and long-term, that we want to do, and for doing that revenue or growing the business, we always see which categories we want to target—not the SKU, number of SKUs to be added, but the categories. We see what is the best that we can do with our existing categories, and then if we need to or want to add any extra category in our portfolio, and then once we zero down on a particular category, then we see what kind of product we should target for that category to have a certain revenue in the coming 1 to 5 years, whatever. So the decision is totally based on that. So there are some categories where the product is selling—one single—selling at one lakh rupees a piece, maybe 60,000 rupees a piece, so there maybe we would just add two or five products. And even if you sell like 20, 30 a month, the revenue by 20, 30 lakhs, let's say, rupees. For some categories, if a product is selling only at, let's say, 400-500 rupees, then we'll multiply it by the number of products that we can sell, and accordingly we'll see if we need to add 10 SKUs for that category or maybe 1,000 SKUs. It's totally based on the type of category and type of product and the prices. Uh, so that is how we think. So generally the—we—we do not have this geopolitical or situation considered while doing this SKU—new products or new SKUs to be added—and that's why in my management perspective I said that I want to highlight that though the number looks good, these are primarily small and low-cost products; it was just a strategic decision.
Secondly, you mentioned about payable days. Uh, yeah, I think Binay is the best person to answer.
Hi Balaji, this is Binay. So trade payable for March 24 was around 8 cr, and in March 25 it's around—in March 24 it was 7, total 8 cr, and in March 25 it's 10 cr. So it—it has gone up by 2 cr, and all are less than—you can say—6 months. Uh, so I was—you know, I was actually looking at it from the number of days, you know, I mean, it's actually come down to 18 days from 30-odd days. Uh, so that was my broad question, but that's fine. Uh, oh yeah, sorry, apology. So I—I'll tell you. So generally, we always want to have the credit from our suppliers which is whatever based on 30 days, 45 days, 60 days, whatever. In our case, more often than not, we are importing these products internationally, and it is—how to say—hard to get that credit terms going with principals because they are international, though we try our best. So when our business goes on increasing, your—like the amount of these days should increase like the—if I'm doing 10 lakh rupees with 30 days credit, generally I'm doing, let's say, 60 lakh rupees worth of credit next year because my business is growing, and I need higher credit terms, but the number of days generally are the same; they are not increasing or decreasing. I think it is more situational. I mean, this is as on 31st March. So to answer your question, the days are not changing that much, but it is more situational that whether we have bought it on 1st of March or 10th of March, one big shipment coming here and there, or a lot of shipments coming 10, 20 days here and there will make that difference. Have I answered your question?
Thank you.
Thank you. I have one question on Robu 2.0. Uh, of course, you've mentioned the successful launch of 186 SKUs, and of course, it's understandable that it's too early to talk about revenue numbers, etc., but would—do you have any ballpark SKU target? Like, for example, you have 70,000 SKUs, out of which 186 SKUs are Robu 2.0, which is at this point in time a rounding error—0.25%. So would you have like a SKU target in mind, saying that, okay, over the next two years 10% of my total SKUs is Robu 2.0, or some such number like that?
Uh, yes, so Balaji, we don't have a SKU number target, as I said. So all our targets or the general thinking process is revenue-based. So we have rough targets in our mind that, okay, we want to do these—these revenue in the longer term with Robu 2.0, for which categories are the best category to target, and then we want to target a certain product in a certain category. So it depends—if like if a one lakh rupee selling price product is doing well in Robu 2.0, I'll be more than happy to just make four or five more SKUs and generate a good revenue out of it; and if let's say 5,000 rupees selling price worth of product is doing good in Robu 2.0, and again there is a market scope for making 50 of those SKUs because there is a market demand, then we'll be making more of those. So our thought process is more revenue-driven rather than number of SKUs driven, even in Robu 2.0. So right now our key matrix for Robu 2.0 is making—making the products, launching them in the market, and getting the first response from the market that whether the products are selling, is the quality up to the mark, are the functionalities of the product up to the mark? What—what are other customer expectations? And then what—slowly and gradually we'll move to what revenue those categories and products are driving, and then double down on the categories that are doing well—or us—well for us, or products that are doing well for us. So that is the—that is the thinking process. Currently we—we have—I think last year was the first year where we have launched a number of products aggressively, and we are happy with the initial response. Products are selling, and people are happy with the quality; that is the first feedback. So we'll—we'll—we'll continue working towards growing this.
Great. Congrats and wish all the—
Yeah.
Thank you.
Thank you. The next question is from the line of Suraj Ma from Perpetual Capital Advisors. Please go ahead.
Hello. Thank you for the opportunity and congratulations on a great set of numbers. Uh, I just wanted to understand that gross margins have declined significantly this year, and so could you elaborate on the key factors that are driving this drop, and do you see this as a structural shift or is it temporary, and how do you anticipate gross margins evolving in the coming quarters? Thank you.
Okay. So uh, I would talk more—so gross margin for us is a mix of our corporate business as well as our retail business, and as a—as a company—as our—as a—as a team, we always like to focus more on our net margins or PAT levels because we have our expenses under our control, and as long as that is happening, we are very sure what PAT margins we are making. Uh, since the gross margins is a—is a mix of any number of factors, this year specifically we have—as we have told in our H1 commentary—we have a lot of big orders, or I'll say a few big orders coming in H1, which we don't foresee in the future as on today, and for—if you see our gross margins in H1, they were around 17%, so they have dropped because of those big orders. If you see in H2, we have again maintained our regular 23-24% gross margins level, which—are generally—we are happy with, and uh, I think in the long run we don't see any—I mean, as on today we don't see any significant change in the gross margin. So whatever we have maintained in H2, we are confident that we'll continue on the same path. It was one exception in H1 because of the pre-orders that we have done.
Okay. And other expenses—what are—if you could give the breakup of what are the key components that are driving this rise? One, you mentioned marketing, and other—are there specific costs that have risen, or any one-time cost in other expenses?
Uh, no, I mean, nothing comes to my mind that there is any other expenses that we have risen. As I said, like if the gross margins in the H1 were low because we have these big orders coming. So of course, once you have higher—higher volume orders, you have to do them only at a certain margin, but uh, I mean, after that there is nothing that comes to mind for an increase in expenses, which is abnormal, I mean, other than our regular—regular expenses or regular businesses that we target. I'm sorry, I could not get the last part. Can you repeat what you said?
Yeah, there is no abnormally increase in other expenses other than what the regular percentage that we target for—for…
Our big one to three expenses. Okay. Okay. Thank you. Yeah.
The next question is from the line of Kiran from Table Tree Capital. Please go ahead.
Hi. Uh, thank you so much for taking my question. Couple of questions. Uh, first question uh being uh we have achieved about 250 cr of revenue. If I ignore the one-time or two-time big orders in H1, uh uh could you tell me so minus that, so 250 minus whatever it is, right? 60 cr, 80 cr, 90 cr, whatever would be around 190 cr. 190, okay, so that that was about 60, okay, great, so 190 cr. So 190 cr is the revenue, so of this 190 cr, can we uh can you tell us for B2C and uh B2B how has the average order values uh increased year-over-year? I'm not looking for exact numbers, right? Because you don't give a split, but I'm just trying to see if average order value is increasing, number of orders per customer is increasing because you're adding a lot more customers both on the B2C and B2B perspective. So, is it the number of orders that's increasing or is it the average order value that's increasing uh year on year?
Yeah. So uh if you look at the presentation uh particularly for this year, our average order value has increased uh I mean it is four, I I mean I mean as as we are not giving the split numbers, so I'm just giving you the total uh all businesses number, so the average order value is around 4,600 rupees uh which was around 4,000 rupees last year. Okay. Correct. And before like before a year ago, like before a year that to that it was 4,900 rupees. So uh as a business we always like to or want to increase our average order value. Uh, however, as a how to say the focus of doing business or the top of the head thing that we have, we never look at it that way, whether I I just want to increase my average order value from 4,600 to let's say 5,000 and then what are the things that I want to do for that. Uh, no, that is not how we uh principally think. The principal thinking is always from the top line of the uh top line of the business. Okay, we have done let's say 200, 34, whatever revenue we have done this year and then we want to increase it to a certain number. For that we'll split the categories and we'll see which category is doing what business and then which category has the potential to increase and then what are the things to be done so on so forth. So if a category, let's say we have added the small components, so the orders of the small component, average order value of the small components will be obviously small, right? However, I really don't go into that uh as a matrix; my matrix is always my top line and the profitability and then for that if I have to increase the average order value or increase the number of orders because anyway revenue will be multiplication of those two, I really don't uh keep either of these as a focus. I generally keep the category and growth of the individual category as a focus. So yeah uh it has increased in last year. However, the management or the thinking process being like this, the focus will be always increasing the top line with the certain margin. Have I answered your question?
Yeah. Yeah. No, no, perfect. That that was absolutely superb. Uh, thanks for that.
Uh, the second is of the uh uh uh I mean this is not more a financial question that your inventory suddenly increased to 55, 56 cr from 24 cr, is that a result of uh building up this 73,000? I mean these are all low cost, so I'm just trying to see whether you're anticipating a lot of growth in the first half of the year and therefore the inventory has built up so high or is it a function of something else?
So uh so the inventory is function of multiple things, one of which you rightly pointed out that our uh number of products that we have to keep in stock, if the products increase. So yes, that number of SKU increase have certainly have a role to play in inventory increase. However, let's say a top of let's say 5 to 10 year inventory is also role of or rather the function of timing. So just to explain you the situation, sometimes if we if we know that our uh our stocks are on their highest peak, so that time our inventory will be 10 to 20% higher, but it it it is just in maybe momentary, let's say if you calculate in middle of March it will be higher and if you go to middle of April it will go down a bit because we have consumed, if you look at our revenue we are also consuming a lot of inventory and then maybe some three four big parcels are delayed. They are not arrived on time. So I think these two combined is showing that rise in the inventory. However, uh our regular numbers for inventory rotation days and the inventory aging that how old is our inventory, those numbers are in line. So I assure you there is nothing to be concerned about the inventory. It's mix of two things. Yes, we have increased number of SKU uh and then that contributes to window increase. Secondly, it's just situational that 10, 20% of that thing.
Got it. Got it. Perfect. Thank you so much. And yeah, thank you. Thank you.
The next question is from the line of Abijit Mitra from Aoness Alpha Investment. Please go ahead.
Yeah, thanks for taking my question. I hope I'm audible.
Yes, you're audible.
Yeah. Yeah. So, in absence of this one-time orders or large orders, I think uh uh you mentioned the sales number also. So, just to maintain this year's number, it means the 39, 40% growth. So, I'm just curious what kind of growth projections or thoughts you have in FY26 over 25.
Yeah. So uh Abijit, we uh generally as a as we do not give any forecast for the in the number say per say, however uh what we have said is uh I'll say right, but if you look into our I mean the way we work right now means uh because we knew from day one that these are one-time orders and may or may not repeat, so from day one how we have shaped 's internal targets and everything that we always exclude those one-time orders from the revenue that we are doing as well as our growth targets that we are taking and we will keep on uh doing the same because that is the practical way of doing things. If we just add those one-time orders and then think on top of that how much we want to grow and everything it becomes really unrealistic. So uh what we have been saying is something that we are confident that we'll do that we uh we will we will continue on the growth path that we have been doing historically. You have to exclude the one-time big orders when we cannot pay this because that is the most practical thing to do.
Understood. Understood. And then there will be some improvement of margins because these are margin dilutive orders. So you expect the net profit margin to reach around 8 and a half, 9% again.
Okay. Uh, as this you know normal course of business resumes uh I as on margin is like uh there are two things, one is this big orders uh coming in or not coming in and then also it is dependent on the product mix that we are selling in a particular year or a particular quarter whatever. uh however I would also not like to comment on those uh whatever percentage of margin we are uh targeting. So whatever we are doing historically I think this time it's around uh pack level if you see around 7%. Uh, but yes we we are at we are always trying to improve it or at least maintain that.
Okay. Got it. And uh lastly I think you have mentioned that the inventory edition has been mostly uh you know in terms of small ticket items uh u you know it's it's it's it's small items, so this a you know small and low cost items. So this AOV will reflect accordingly if it in the first first half of you know first 9 months I mean will the AOV sort of come off because of this kind of is there a shift in sort of product mix that you are trying to suggest when you say that this edition is mainly because of small and low cost items. So [Music]
uh let me just uh I mean correct me if I'm wrong. So what you're asking is average order value will it increase because of this low and low cost item will increase it will decrease.
Yeah. Yeah. Yeah. There are uh it's hard to predict because what may happen is our regular customers will also buy these low cost item in the regular orders. So that value should increase because they're already buying 10 product from me. Let's say average order value at this point 4,600. Even if they add 45, 500 rupees worth of these products. So my average order value should go up again. I'll have some customers who are only buying these new products. So maybe the order they are placing is only 1,000 rupee or 2,000 rupees which is let's say for the time being 1,500 average order value for the customer who is only buying this new product. So it is really hard to predict what will prevail when you calculate the total average order value because we already have a big customer base which are buying these existing products with 4,600 average order value. So both of both of uh both are the possibilities will only come to know when it it happens. Yes. However, we are confident that any of these happen ultimately we are going to generate higher revenue. I mean that is what the whole point is of adding this and uh that is how we think that okay whether our old customer buys 500 rupees worth or whether our whether a new customer comes and buy 500 rupees worth of this product doesn't really matter as long as I'm gaining that 500 rupees in revenue and that is how we think that the category and the revenue and then multiply by number of whatever orders or total category wise revenue and add this up and then see if it is viable to add that category on understood and your your inventory days you don't feel is going to go up permanently right I mean sort of sort of come off again next year you feel this year this know sudden jump of inventory days that that is going to normalize sort of again next year you feel or it's sort of permanent high in terms of days that you see from here on uh our inven so primarily because we have added these products we expect our inventory days to go slightly up. However, you we you have to understand this is a different category of products and these products have higher margins. So, they allow us to have higher inventory days because the the margins have slightly higher margins take care of uh these inventory days. So uh we actually we don't uh consider inventory based as a standalone matrix but we knew that when we are adding this uh 50,000 whatever SKU we have added 50,000 we cannot look closely very closely each of the products cannot pay attention to each of the product we have to buy them in kind of bulk so there will be more inefficiencies in inventory However, the margins on this product are such way that even those little bit in inefficiencies in inventories, even little bit generation of dead stocks are taken care in the margins. So we are okay with that. So it's kind of a trade-off that we are doing. Now how much it will add to our inventory days and everything that we are not sure at this moment. However, whenever we calculate our inventory rotation, it is always category wise. So, we will have a clear picture uh internally that okay for this particular products, how we are doing and what are the margins and if it is good or not. For others, it should continue the same. We have historical data. So, accordingly, we'll tweak and move and you know readjust align our path.
Hello. Yeah. Can you hear me?
Yeah. Yeah. So, have you have you uh
Yeah. Yeah. Yeah. Yeah. That's that's all from my side. Thanks for the answer. That's all from my side. Wish you all the best.
Thank you. Thank you.
The next question is from the line of Rohit, an individual investor. Please go ahead.
Thank you for the opportunity. It's always a pleasure to listen to you speak uh and and understand the business model. Uh, my first question uh uh so so what we have seen is uh the growth has been rapid and the return on uh capital and net worth has come down and I mean over time if the growth of our business is faster than the or is higher than the returns that we generate on the capital that we are investing, what that means is uh we would need further dilution along the way. So I think we diluted one and a half, two years back. Do you see I mean for us to maintain our growth rate, us requiring to dilute sometime next year or the year after that and uh the following question is uh I mean three of you together own equal amount of stake. So what is the cumulative promoter stake below which you are not comfortable going or do you think along those lines at all?
Uh, thank you Rohit. Uh, thanks a lot for your questions. So uh as you mentioned growth has been rapid and uh according the according to that the dynamics of the business are changing. Uh, so we we are also very fluid on this. We are uh we we have been doing since only over a decade I guess. We are every year we are growing and then we face some new challenges. We find some new solutions. So it's really things are really clear in hindsight. However, looking in the future picture is always a little bit fuzzy. We know the direction. Uh, however, we always keep on course correcting as we go in future. Uh, whatever is the best for the business to the best of our abilities. Now as on today we really don't have any uh plans for dilution. Of course we even if we had it would be really stupid to say it out loud on the on this call, but yeah to be very frank we don't have it as in as on today and whether we'll have it uh in recent future or not that only the business requirement or the dynamics will decide. Secondly, three of us currently own equal uh stake which is around roughly 69%. Uh, so yeah we also are not uh we have also have never discussed this that you know how much is the minimum and below which uh we are comfortable or not comfortable. Uh, we just diluted whenever we felt that there was a business requirement and then uh we are here at 69. So yes, there is no such number or percentage, never never never was the discussion uh to be very frank that below what will comfort we we will be not being so comfortable or whatever.
Thank you, that was helpful and uh uh so so I mean we have started taking debts, right? I mean we are today at the end of the year at least it's again a point in time depending on when we decide the inventory but the debt is at the highest level uh that we've had so far obviously because the business is growing so do we have an internal metric on what is the maximum debt at any point of time that we'll take in terms of its ratio to equity or any such number that we look at key beyond this we won't take any debt uh for the debt you are for the loans.
Yeah. Debt on the balance sheet.
Yeah. Yeah. For the debts you are saying.
Yeah. So uh we really don't have any uh highest number of uh debt. So our our thinking is very simple as I always say we want to grow this much to grow this much with this much margin to do that what categories demands what whether we have money to do that uh to buy inventory or whatever investment we want to do. If we don't have money then what are the options debt option we have. So if we say take whatever 5 cr as a debt extra debt than what we have what are the returns that we have to give on that and is the category that we want to expand will provide us more than what what investment in debt and returns it will have. If it is a yes we'll go ahead. If it is a not then we we should I think we shouldn't do that. So this is a top down process. So if uh the category requires certain amount and we are confident that we can earn more uh than what is going as a interest of that then why not and uh we only take that when we are sure of that return. I think that is the uh thinking uh behind that and uh to be very frank I think you guys the investors are really good at this financials and numbers crunching everything. We on the other hand are more of uh driving this approach of topline and growth and categories more of a business persons or technical approach. uh me personally if I go look into these ratios and this and that it it becomes really too much to look at and you know you you just we we just as a management we just try to keep it simple I I think that helps us or the way we have been doing is this and it works well for us so far. So yeah that's that's about them.
Uh, thank you. So uh two questions last uh what is the ad I mean the publicity spends that you did this year uh do you have an idea of what the number uh uh there and the second question I have is uh uh uh I mean in the sense of FY you move from B2C to B2B uh in 2019 I guess the next part of the journey would be to probably supply the bulk requirement of the customers as and when required. So where are we on that journey? I mean I think right now we provide for the R&D departments uh and the bulk requirement are provided by some of these big traders or big distributors. So uh do you think see us in reaching that level in some categories?
Uh, okay, I'll I'll answer your first question first. The marketing spend generally our target is to maintain it maintain it below 2.5% of the overall revenue that is sorry the online revenue that is the internal number uh I'm not sure exactly how much we are doing that doing as of now but yes it is under that which is below that uh I think mainly the question arise because we did uh participate in domestic exhibitions this year multiple of Uh however we are always like whatever marketing activity do we always have the limit for that expense. So anything we do we you have to maintain it below that and I think this year we have uh got this budget for that because we have grown our revenue well and that has allowed us to have that extra percentage in budget which we can use on this domestic uh exhibitions. Secondly, you ask about growing from B2C to B2B and where do we foresee that uh going up? So yeah, we have grown from B2C to B2B and as on today we are doing a lot of not only the R&D orders but also small productions uh small to medium scale companies production orders. We are doing some uh I would say production or big orders for some of the big companies and obviously we would love to go there and increase that. uh however I mean uh how long how far we are really not uh we we are not really doubling down on that as a target per se because there are different dynamics that comes into play for those orders and even small and medium scale companies base is growing very rapidly in India and that customer base we we're already fulfilling their requirement uh they're happy with the service and the products at the prices that we give. So of course we'll try to go into those high volume productions. Uh, but when and how or how much that happens is uh currently that I really can't foresee.
Perfect. No, awesome. This is very helpful. Thank you so much for your time until I'll get back to the queue.
Yeah. Thank you Rohit.
The next question is from the line of Shabbam, an individual investor. Please go ahead.
Hello, can you hear me?
Yes, Shubam, I can hear you.
Hey, uh, so I had the same question on the line of uh like when you will be moving from R&D to this bulk uh orders. So I think that has been answered because I've been a customer to for your products and most of your sales are uh uh in the category of uh development boards that is Arduino, Raspberry Pi and second is probably 3D printers. So those are like one time or like low volume orders which are not probably repeated after R&D cycle is completed. So like will you be uh getting into bulk orders like Mouser, DG if you have to compare yourself with them?
Yeah, as I already said, uh, Shubam, that is, uh, always on the table that we want to have these big customers. We want to, uh, grow these orders. However, I'll just like to slightly add on to this. So, yeah, the way you mentioned Arduino and Raspberry Pi, there are some customers who buy, let's say, a,000 Raspberry Pi or a,000 pieces Arduino per month from us. So the dynamics of markets are also uh changing. A lot of customers even they do they have 500,000 pieces worth of product requirement they don't want to go into the cycle of developing their own boards and everything. So they are using these boards also as their uh I'll say small and medium scale volume production. only when they move something like 5,000, 10,000 pieces a month then they are moving to developing designing their own boards to save some cost and moving in that direction. So yes, we would like to be uh serving those customers as well and strategically uh I cannot tell you on this call exactly what we're doing but yes we are sure strategically we are doing things internally which will position us well uh to serve these orders to serve these customers to support these customers. So yes.
Yeah. Got it. And just a small question like how big is the opportunity for utal innovation mission for you guys? Is there anything that you guys supply L1, L2, L3 any kits?
So we have been supplying these utal uh innovation kits kit uh to the different customers and uh these are since these are standard kits I think we have already listed them as a single product the whole kit as a single product on our website. So yes, we have been supplying those kits directly to some consumer as well as to uh some of the project guys who have been buying these kits and then you know doing the execution on their own.
Okay. Okay. That that answers my question. Thank you for your time.
Thank you Shubham. Thank you.
The next question is a follow-up question. It's on the line of Parikit Kabra from PK Advisor. Please go ahead.
Hi, thank you for the follow-up. Um, actually uh you know people have spoken about margins in this call previously and you have maintained that you know you guys are targeting the current margins at the steady state, the current levels you want to maintain that but there is a pattern, there's a trend to your uh margins for the last uh few years, you peaked and I'm talking about EBITDA margins, you peaked at about 16% in FY22 and since then like clockwork is reducing by a couple of percentage points each year. Um, could you elaborate on why that is happening and why we think that will stop happening from next year onwards?
Okay. I uh right now I don't have the numbers in front of me or the uh exact data. However, if I talk about our PAT margins as on today, we are always like you know even even with the current margins, we are always trying to maintain uh we in future we want to maintain those margins and this is not a secret I mean it's very obvious that when we are going for the bigger margin uh bigger margin uh sorry bigger market uh or more of industrial customers you would have to sacrifice has some margin or the margin goes on reducing. uh of course everybody knows since like since as this is not the secret this is the second thing is also not the secret that okay it will go down only up to a certain level because after that uh the margins should stabilize let's say give or take half a percent or 1% here and there because beyond that then it the business also becomes uh not lucrative to do on those margins. So on one side we are always trying B2B customers or the high volume customers
or the higher market size. On the second side, this also uh this also reduces margin slightly, and then we believe that it will stabilize at some level.
Now we are we are always trying to maintain our margins or do a little tricks here and little tricks there to increase uh add on the margins half a%, there 1% there. If you have listen I mean if you have listened to me closely in the call whenever I'm talking about those high low value 15,000 50,000 SKU, you always hear me saying that the margins are good on those products, so it is also one of the effort to target a category where we have higher margins so that we can gain something which we are uh gaining margin somewhere where we are losing half a percent, 1% somewhere else. So these kind of things are always going on, and uh let's see how it goes.
All right, perfect. Thank you so much.
Yeah, thank you. The next question is from the line of K from please go ahead.
Hello sir.
Yes, please. Education good numbers. I have just two questions from your side uh on client list on the website. We have mentioned many government association or organization and corporations, so are there any order on representative mutual on that side uh I heard your question till the point where you said there are a lot of government client mention on our website, repeat. So my question is in our B2B segments we have many organizations from the government sides and many national level institutions which are mentor or client and is ordered. So are this ordered from their sides is in repetitive nature.
Yeah. So we have essentially two types of businesses. One is our online business and other is corporate sales. So generally our corporate sales orders are repetitive uh in nature, depends on customer requirements. So even if it is a C company like let's say Tata Mangro Bajaj and if they just want to set up a test lab or the R&D lab in their company, they're ordering few components uh few multimeters or devices from us, it will be onetime purchase, but even if they are making us some device which is like 400 500 pieces a month or every 400 500 pieces every quarter, it will be of repetitive in nature.
uh okay, so or B2B orders are generally repetitive in terms of if they are production based orders, if they are lab based or R&D based orders, small prototyping then we have seen that they're repetitive from the type of customer but different products.
okay, and the second question is is you mentioned that we have increased the SQ1 noboard 2.0 though. So as we are entering the production of our own products uh do we you know see any or for see any vendor issue because we are categoring the same product that maybe they are also doing. So do you face any vendor leaving our site in last 9 months?
Uh we do not we have not first of all so okay I'll answer the question straight first. We have not seen any vendor leaving the site because uh generally these vendors like the market is open like in one category we have eight 10 vendors maybe doing the similar kind of product products. Everyone has his own strength and everyone has his own some some are like premium quality products, some are like very cheap, some are in the middle somewhere they provide value to different kind of customers. So our vendors or the agreements are non-restrictive on these kind of products generally.
Uh secondly, as a part of or strategic part of rubu 2.0, we are never trying to replace a product on our website. Uh that will be too much effort for too little of a gain. So we always see the categories that we believe will do good in future. And secondly, we want to fill the market gaps. So I always give example of smart elix modules where we seen that there are some principles in China manufacturing the modules who are very cheap but the quality is not that good or rather very bad quality and there are some principles Europeans who are making those modules in development goods who are really pricey. The quality is good, the price is really high. So we found a gap where we felt that okay we can make the modules in India and we can provide a one-year warranty, the quality should be good, but the price we can keep right in the middle where there is a customer base who would like to procure these products and we'll be happy with the performance because they want to use them in industry use cases at a reasonable price, they don't really want to procure a European premium. And we have been developing this product and we have been finding some good customers based in this uh gap that we have founded. So thinking is more like that find the gap and try to place the product in that gap rather than just replacing a product because ultimately what will we gain then if I'm just replacing my old revenue by my own product, the delta of revenue will be nothing or not significant.
okay, and I think uh in the future also we'll follow this team. Yeah, we we want to follow the same strategy in future because that's the most logical thing to do.
Okay, thank you and all the best for the future.
Yeah, thank you K.
Thank you ladies and gentlemen. That was the last question for today's conference call. I would now like to hand the conference over to Miss Bumika Maheshwari for the closing comments.
Thank you Steve. On behalf of Securities Limited, I thank Mac for team for giving time we spent on this call and responding to all the queries in a detailed way. I would also like to thank all the participants for joining this call. Now I would like to hand it over to Steve for closing remarks.
Thank you on behalf of Markforce Limited and H Security. That concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.